Socially Responsible Investment and NZ Managed Funds

fund-source-logo30 Mar 2015 15:23

As KiwiSaver account balances grow and New Zealand investors become increasingly interested in where their savings are invested, more interest may be shown in socially responsible investment (SRI). A number of New Zealand fund managers offer SRI options. This article will look at the basic terminology used and the different kinds of options available to investors.

SRI is an investment process that considers environmental, social and governance (ESG) factors. This means that rather than simply looking at the potential return of an asset, an investor will take into account the effect their investment will have on the environment and society and whether the corporate governance of the company also considers these factors. Fund managers are able to show their engagement with ESG issues by signing the United Nations Principles for Responsible Investment. The six principles represent a voluntary commitment to take ESG factors into account during the investment process. A number of New Zealand fund managers are signatories to the principles including Devon Funds Management, Harbour Asset Management and Salt Funds Management.

A common way to invest responsibly in practice is to exclude certain industries entirely. These industries, often referred to as ‘sin stocks’, include alcohol, tobacco, pornography, gambling and armaments. A number of New Zealand managers that offer SRI funds try to exclude certain industries from these particular portfolios. For example, specific SRI funds are offered by AMP Capital, Grosvenor Investment Management, Pathfinder Asset Management and Quaystreet Asset Management. As investor appetites change, so do the industries that are considered ‘sinful’. For instance, Grosvenor and Hunter Hall (an Australian fund manager) have both recently removed direct exposure to fossil fuels in their SRI funds.

The different ways in which managers can take ESG factors into account means that definitions necessarily differ from manager to manager. At one end of the spectrum is ‘deep green’ investing. Rather than simply excluding industries that are perceived as having negative social and environmental impacts, deep green investing means actively seeking out investments that can have a decidedly positive impact. Although Hunter Hall offers a deep green fund, this investment style is relatively absent from New Zealand. Grosvenor attributes this to “hypocritical discomfort” where investors do not want to acknowledge the ways they ignore ESG factors as consumers.

Finally, there is discussion around the extent that socially responsible investing affects investment returns. Some analysts argue that limiting the investable universe of a fund can decrease fund returns and increase volatility. Others claim that actively managed SRI portfolios can offer strong returns.

There are a number of SRI options available to New Zealand investors. These include KiwiSaver funds and non-KiwiSaver unit trusts. For more information about the SRI exposure of your portfolio, talk to an Authorised Financial Adviser.

– See more at: FundSource

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Things a Financial Adviser can help you with No. 6 – Goals

How do you define success?  What are your expectations of your life?

You wont be happy at destination if you cant be happy on the journeyGoals don’t necessarily have to be about an end, they can be about stops on the journey, and lets face it, life is more of a journey than a destination.

As financial advisers we need to be good at listening, good at listening to you.  You may not know what your “goals” as such are, but if we listen hard enough we can begin to draw a picture of what you are expecting from your journey and how we may help you achieve those expectations along the way, to be successful.

Success is not always having a result that the rest of the world can see, or even achieving a goal of meeting an expectation, for most people it is an overall knowledge that they got want they wanted out of life and were able to give back what they wanted also.

Success can be all sorts of things, and often a few things in a list, such as:

Diamond Princess

Diamond Princess

  • taking the holiday of a lifetime
  • leaving a financial legacy to a family and/or charity
  • leaving a family that know the meaning of love and are known for it
  • being able to buy the motor-home and travel
  • being able to provide a comfortable retirement
  • being able to pay rest-home fees without destroying value in the family home
  • having grandchildren/family to spoil and being able to spoil them

Whatever you define as success, make sure you are asked the right questions and then you are listened to.  It is your money, to achieve your success.

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What should I ask a Financial Adviser?

The article below is available on the website of the FMA (Financial Markets Authority).  There aim is to educate the general public on what you need to know, as well as monitoring the Financial Markets in NZ.  If this helps you, please let us know…  

Choosing your adviser is an important personal matter. Do some research and consider talking with a few advisers before you decide which one to work with.

We’ve developed some questions you can ask financial advisers, and we offer some ideas about what to listen for. If you are receiving personalised investment advice, you should be able to find some of this information in an adviser’s disclosure statement. You can compare disclosure statements from advisers.
Before choosing your adviser, ask several financial advisers as many questions as you need to until you’re confident you completely understand how they can help you.

  • Advice type
  • Adviser type
  • Puts client’s needs first
  • Reasonable fees
  • Professional standards
  • Professional experience
  • Dispute resolution

Advice Type

Q: What type of advice or service do you provide?

Listen for: Whether the service is information only (information is not considered advice), class advice, or personalised advice. Personalised advice is tailored to your own situation, and class advice is suitable for most people in a group or class. See our information and the different types of advice to help give you a better understanding.

Adviser type

Q: What type of financial adviser are you?

Listen for: AFA (Authorised Financial Adviser) or QFE adviser if you want personalised investment advice. Both these types of advisers have been licensed, and are monitored, by the Financial Markets Authority. Ask them what types of products they are licensed to advise you on as there are different categories of AFA and QFE licence.

If they are a registered financial adviser individual, or work for a registered financial adviser entity, (but are not an AFA or QFE) they are not licensed or monitored by the Financial Markets Authority. Registered individuals can give you personalised advice on simpler products such as insurances, mortgages and term deposits. Registered individuals or entities can provide you with ‘class’ or generic advice on investment products such as KiwiSaver or managed funds.

Find out more about types of financial advisers and kinds of financial advice.

Q: Do you have any adviser qualifications?

Listen for: A description of how their qualifications relate to the financial services they provide. For example, an AFA is required to meet a minimum level of competence set out in their Code of Professional Conduct.

Puts Client’s Needs First

If you are looking for personalised advice, consider asking:

Q: What information will you need to be able to provide me with financial advice that is tailored to suit me?

Listen for: Lots of questions about your circumstances and needs. For instance, they should ask about your income and expenses, what you own and what you owe, your dependants and your financial goals, both short and long term and your appetite for risk. They should discuss your insurance needs and things such as estate planning or business succession planning if these topics are relevant to you.

Q: How will you deal with a range of different financial objectives for my individual goals?

Listen for: Will help you prioritise your financial objectives, explain and discuss choices with you and develop a strategy to help you achieve your objectives.

Q: Am I a retail or wholesale investor?

Listen for: Wholesale investors are defined in the Financial Advisers Act and can include entities such as family trusts. Your adviser needs to explain what a wholesale investor is and whether you are regarded as one. Wholesale investors have less protection than retail clients, so you need to understand the implications of being a wholesale investor. You can opt out of being a wholesale investor if you wish.

If you are looking for generic or ‘class’ advice, consider asking:

Q: What ‘class’ or group of investors is your advice suitable for?

Listen for: A description of the general characteristics of people like you with similar circumstances and requirements. This is sometimes referred to as your ‘class’ or group that your adviser has taken into account to advise you, e.g. your age group and tolerance for risk.

Reasonable Fees

Q: How are you paid – via fees or commissions? How much is your advice likely to cost?

Listen for: If the adviser charges a fee-for-service, it is easier to know how much you are paying if it is a ‘flat dollar’ fee such as a fee for service arrangement. If a ‘percentage of assets’ fee is charged, make sure you are clear on exactly how much you are paying, when this is to be paid, or if it is an on-going fee, how often it is to be paid. Make sure they give a clear explanation of how much they expect to receive, now and in future years (regular ongoing costs). If you are receiving personalised investment advice (only available from an AFA or QFE adviser), a general description of how they will be paid will be given to you in the adviser’s primary disclosure statement. Once you’ve chosen an adviser, and they’ve made financial product recommendations, they will follow up with specific payment details in a secondary disclosure statement.

Q: If they charge ongoing fees, what will I get for these fees?

Listen for: Regular reviews of your circumstances and investment portfolio. Re-balancing of your investment portfolio if necessary. If you are paying ongoing fees, you should expect to have reasonable access to your adviser when you need questions answered or want to discuss a financial issue with them, and they should schedule regular reviews with you.

Professional Standards

Q: How do you keep up to date with changes that might affect your clients?

Listen for: Participants in regular Continuing Professional Development (CPD) or other relevant training. Is a member of an industry organisation such as: Institute of Financial Advisers (IFA), Professional Advisers Association (PAA), or SIFA.

Q: Do you have to abide by a professional code of conduct?

Listen for: AFAs should tell you about their Code of Professional Conduct. This sets out the minimum standards of competence, knowledge and skills, ethical behaviour and client care. It also specifies their continuing professional training. AFAs can be disciplined for breaches of the Code.

QFE advisers do not have to follow the Code but their QFE should have established systems and procedures at an equivalent level to the Code.

Registered financial advisers are not required to follow a code of conduct.

Professional Experience

Q: How long have you been giving financial advice?

Listen for: If they have only been giving advice for a short time, ask whether they receive supervision or oversight from a more experienced colleague or their employer.

Q: What type of clients do you mostly see? What are the majority of your clients trying to achieve?

Listen for: It’s helpful if the adviser deals with people in a similar situation to you, for example, young families, retirees or small businesses, as they will have experience in the type of advice you are looking for.

Q: What products do you advise on? What about the products I’m currently invested in?

Listen for: Is their product range restricted to a certain type of product or is it limited to products from a small number of product providers? Are they aligned with one product provider only? Can they compare different products? A bigger range of products can mean more choice for you. This could also be important for any existing products you have, such as your KiwiSaver fund or managed funds. Can they provide advice in relation to your current funds or investments, for example, even if it is not on their approved product list? If they are recommending disinvestment from any products you currently hold, make sure they tell you what the risks and benefits are in doing this.

Q: How do you establish a client’s tolerance for risk?

Listen for: Use of a risk profiling tool, for example, a comprehensive questionnaire to assess clients’ tolerance for risk (also known as a risk profile).

Dispute Resolution

Q: How do you deal with customer complaints or disputes?

Listen for: A clear description of their internal process for handling customer complaints. They must also belong to an external dispute resolution scheme if financial services are provided to retail clients, and the name of the scheme will also be in the adviser’s disclosure statement.

Link to original article, click here.

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Kiwisaver should be part of your long term savings plan

3 Good Reasons that Kiwisaver should be a part of your long term savings plan:Saving can be a tricky balancing act

  1. Untouchable (mostly): a lot of people have issues with impulse buying or credit control, which is evident in the figures of how much we are all in debt, Kiwisaver is your opportunity to hide funds away for the long term and you can’t spend them.
  2. Tax effective: because Kiwisaver uses PIE tax, you don’t need to contribute to the tax payments, it is done for you, and the maximum tax you will pay is 28%, which is lower than the PAYE top payment of 33%
  3. Employer Contribution: for employees, your employer will be contributing to your savings, what a fantastic incentive to provide for your long term needs.

Ok, so one more, you can change providers easily and it won’t cost you the earth.  You can pay an adviser for advice on who to invest with or just do it yourself, all information is readily available and reasonably easy to read.

If finances don’t interest you, pay someone to do it for you, just as you would pay someone to do other jobs you prefer not to do, like lawns!

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Check the list FIRST!

If you are considering engaging a Financial Advisers in New Zealand, one of the first (and easiest) things you can do is check a couple of lists.Notepad

The first list to look at is the IFA website (below). IFA members must meet professional standard that are over and above the regulatory requirements. You can also try the advanced search that allows you to select a ‘CFP’ accredited advisor who has achieved an even higher certification.

A CFPCM (Certified Financial PlannerCM) Member has advanced competence as a comprehensive financial planner by completing:

  • Minimum of three years industry experience
  • Vocational training (the current requirement is a Certificate in Financial Services, equivalent to six months’ full-time learning)
  • An approved Graduate or Post-Graduate Diploma, equivalent to a year’s full-time university study
  • One years’ approved supervision
  • A final Case Study based Certification Examination

You should also check that your adviser is listed on the Financial Service Providers Register (FSPR). By law, ALL financial advisers must be listed here. You can search by the name of your adviser, or their company name. This list also details what services each adviser is able to provide.

If your adviser is not listed on both of these lists, you should ask them why.

Please call or email DecisionMakers if you have any questions.

MedLogo_CMYK_BlueBlkCFPCM and  are registered certification marks and CERTIFIED FINANCIAL PLANNERCM is a common law certification mark owned outside the U.S by Financial Planning Standards Board Ltd. Institute of Financial Advisers is the marks licensing authority for the CFP Marks in New Zealand, through agreement with FPSB.

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How do I make financial decisions during a time of loss?

This is a question asked very often, but not enough.

Grief can come in all forms, divorce, death, moving, children not following the path you would prefer for them and so on or even winning lotto (it is amazing how much grief this can bring).

In these times finances are usually the last thing we want to think about, but is usually the thing we have to deal with the most, it can be tiresome, boring and feel downright unfair.

Some of the strategies that might help are:

  • Have a backstop, have that person that can keep their cool and remain unflustered standing in the sidelines, whether it be a professional or not, that wisStones in line Truste friend who can see through the fog on your behalf, and have YOUR best interests at heart.


  • Don’t make any big decisions until you are ready, because they will usually have far-reaching consequences. Just stop, be still, breathe, and find that time out for yourself where you can rejuvenate your soul, even if it is only by taking a five-minute walk along a beach, or playing a musical instrument, listening to music, watching your favourite movie, finding something that makes you laugh.


  • Remember, there is always a light at the end of the deep dark tunnel you find yourself in, even if you can’t see it yet. Take one step after the other…

The cure is of course prevention, not preventing the grief, but prevention in that you find people you can trust to put your interests first, before you need the help.

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How much do I need to retire?

There is one question on the minds of new clients, and it is the easiest, and hardest, question to answer. How much money do I need to save to have a comfortable lifestyle in retirement?

Over the last 17 years I’ve heard this question phrased so many ways – if I had a dollar for every time I’d heard it… I would be retired. It’s actually the most important question to have answered as it sits at the core of financial and retirement planning. Until this question is answered, you can’t clearly define your goals, and therefore have a far lower chance of achieving financial independence.

The good news is the mathematics required is actually very easy. But the dollar amounts will vary for every client.

We run a proprietary retirement illustration program which takes into account the expected rate of return and inflation, age and life expectancy etc. The formula we use provides a very similar result to that from the calculators provided by the Commission for Financial Capability (formerly the Retirement Commission – see link below). While the formula is very complicated, you can generally get a similar result with the following simple formula:

Investment capital required at retirement = desired retirement income x 20

For example, if you require an income of $40,000 per annum, you will need a lump sum of around $800,000 when you retire.

Isn’t this too simple? Shouldn’t this be a more complicated formula? I have been helping clients meet their retirement goals for most of my working life. I have completed 100’s or even 1,000’s of retirement calculations, and this simple formula works almost every time.

Yes, this will be different for clients who are prepared to accept greater or lesser volatility, or for clients who are prepared to consume capital versus leaving capital intact. But as a rule of thumb, in the absence of a comprehensive financial plan, twenty times your desired income is a good place to start.

So that’s the easy part. The harder part for many people is actually determining what income they will require in retirement. This part really requires a lot of thought and discussion. In my experience, most couples will spend more time thinking about what they will do on their next holiday than how they will spend their retirement.

  • Where will you want to live?
  • How often will you replace your car?
  • Will you travel?
  • Do you want to support your children or grandchildren?

Take a large piece of paper and write your age at the top. Write the number 100 at the bottom of the page. Somewhere between the two, write the age that you plan to retire. Now write down all the things you want to do before you retire, and all the things you want to do after you retire and attribute an estimated cost to each of those items. Once you completed that, make an appointment with a DecisionMakers, CFPCM accredited Authorised Financial Adviser (AFA).

You have just completed the first, and possibly the hardest, step in creating a meaningful financial plan.


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